20th: Higher Quake Estimate : 20th Century’s Quake Tab Hits $815 Million : Insurance: News sends stock price tumbling. Firm’s ratings are downgraded and sale speculation resurges.

Twentieth Century Industries raised its estimate of Northridge earthquake losses Thursday by a stunning $130 million--to $815 million--gouging a new hole in the insurance holding company’s capital base and raising questions about its ability to survive without a major infusion of equity or even outright sale of the company.

On Wall Street, surprised investors punished 20th Century’s stock, driving it down 25%. The stock was by far the worst performer on the New York Stock Exchange on Thursday. It closed at a new 52-week low of $9.50 a share, down $3.125 in heavy trading of 2.16 million shares.

The insurance-rating firm A.M. Best Co. quickly downgraded its rating of 20th Century’s two insurance units, 20th Century Insurance Co. and 21st Century Casualty Co. The rating fell two levels to B- (adequate) from B+ (very good). This gave 20th Century the second-lowest rating among the 100 largest U.S. property and casualty insurers, Best senior vice president John H. Snyder said.

Twentieth Century also disclosed Thursday that on Sept. 2, it asked the California Supreme Court to rehear its constitutional challenge to regulations enacting Proposition 103, the 1988 ballot initiative mandating insurance rate cuts.

The action is considered a legal long shot, since the court last month rejected the challenge unanimously, leaving 20th Century liable for about $119 million in rebates to policyholders.

The company has set aside only $50.9 million for the rebates, so the defeat in court represents a potential $68-million drain on the firm’s surplus, or reserves against losses.

State insurance regulators, who have been engaged in regular discussions with the Woodland Hills-based insurer, said 20th Century has been ordered to produce a “game plan” for bringing its surplus back up to an acceptable level.

At the close of the quarter ended June 30, 20th Century reported a surplus of $252 million, barely above the state Insurance Department’s target level of $250 million. The company reached that level by securing a $175-million line of bank credit.

But Thursday’s revised estimate of earthquake-related losses means that, after taxes, the company’s surplus stands at about $160 million, Snyder estimated.

Snyder said he felt “burned and surprised” by the sharp upward revision of the loss estimate, because he had received assurances from 20th Century’s management that its previous estimate of $685 million contained “a cushion” against further, unexpected claims from the Jan. 17 quake.

“It’s awfully late in the game to be coming back with a 19% increase in their estimate,” Snyder said. “That’s not fine-tuning.”

Richard Dinon, 20th Century’s senior vice president and chief spokesman, said the latest loss estimate--which is at least the fifth revision--resulted mainly from damage discovered after home repairs were begun, damage that was not found in initial inspections.

The earthquake claims reported to 20th Century number 44,347, of which 10,008 are for auto damage, the company said. The number has not changed significantly in recent months, but the cost per claim has risen sharply.

Overall, the Northridge earthquake is expected to result in insurance losses of $7.2 billion, by the industry’s official estimate. Twentieth Century, with a high concentration of homeowners policyholders living near the San Fernando Valley epicenter, was proportionately the hardest-hit insurer.

Richard Baum, chief deputy insurance commissioner, said Thursday that in negotiating with 20th Century over its reserves, its Proposition 103 rebate liability and the 6% rate increase for auto insurance it has requested, the Insurance Department is “committed to having a viable, ongoing insurance company serving California policyholders.”

Baum’s careful statement left open the question of 20th Century’s independence.

At the annual meeting in May, 20th Century executives broached the idea of selling the company. They implied that such a move might be averted if the quake losses didn’t rise much beyond the $600 million then estimated and if 20th Century was successful in its Proposition 103 challenge.

Both hopes have gone badly awry.

A.M. Best’s Snyder said 20th Century seems to have exhausted most of its options, short of a large infusion of equity or being sold. “I think they’ve reached that point,” he said.